1. Competitiveness of Eastern Europe
What can companies from Eastern Europe (EE) do to escape the bind
between the more productive West and more cost-efficient East?
Team IQ°
Paul
Ovtschinnikow
Germany

2. Summary Competitiveness of Eastern Europe IQ°
In stead of focusing on the competitive IT and sophisticated science
industry EE companies can use their strengths in craftsmanship and the
advantage of regional position to conquer the local market
Summary EE companies have only a short history and thus lack of knowledge and globalised
brands. Small funds and limited resources disable leadership ambitions in certain
industries. Focusing on one trend might be too risky
The main advantage of companies operating in EE is the cheap but still highly skilful
Situation
workforce, In particular craftsmanship, on the advantageous position between the
EU market and the resources in Asia
The main advantage of companies operating in EE is the cheap but still highly skilful
Idea workforce, In particular craftsmanship, on the advantageous position between the
EU market and the resources in Asia
As the trend setters in key industries are to far advanced I suggest the “anti-trend”
Action strategy and focus on local products and services like healthcare or craftsmanship
that can not be outsourced globally
Subsidies for small and midsized companies who strife who export products or
generate benefits abroad. Companies shall develop and market local brands and
Advantage
services and sell then on the western market
Smaller companies in local craftsmanship and healthcare business tend to have
higher margins, being dynamic, value oriented and thus attractive for employees.
Next Stepps Having a balanced structure makes them also more stable

3. Situation Competitiveness of Eastern Europe IQ°
A general question on a general topic can not lead to a specific answer.
The EE countries and the companies are much to different to be standar-
dised. Thus the following strategy will only highlight absolute values
Summary Eastern Europe
The countries are in different situations having unique weaknesses and opportunities. A strategy
for one country might not be working with another. It is even impossible to define a general
Situation strategy for one country due to differences in local politics, culture, infrastructure, knowledge, etc.
And a period of one decade is not enough to balance (e.g. Eastern Germany has still tremendous
economic differences with West Germany – after more than two decades!)
Idea Companies
Same for the companies. A strategy that might be perfect with one will be totally wrong for
another. Let´s take two IT companies. While an established, bigger one would focus on the core
Action
products (cash cows) the younger will need to totally focus on innovative, cheaper solutions to
able beat the first one. Same for others
Advantage > For these reasons the strategy will focus on general competitive advantages that are “absolute”
to most countries in West-Europe / Asia
Next Stepps

4. Situation Competitiveness of Eastern Europe IQ°
EE companies have only a short history and thus lack of knowledge and
globalised brands. Small funds and limited resources disable leadership
ambitions in certain industries. Focusing on one trend might be too risky
Summary Misleading Strategies / Risks
Focusing on one industry /product / knowledge:
- Makes dependant and might lead to a catastrophe in case of failure (e.g. Island and it´s risky
investments, several African countries and the drop of agricultural prices on the world market)
Situation - Can not feed the whole economy
- Chasing every new trend (there are a lot of them and history has shown not all are positive, and
often misleading (dot-com bubble, subprime mortgage crisis)
- GDP is not the only measurement. Human Development Index has also to be considered
Idea
Weaknesses
- Comparatively weaker quality of life, politics, less of opportunities, etc. lead to emigration of
qualified people (brain drain)
Action
- Lack in strategic resources like oil, gas, specific metals
- To far behind in the R&D of highly profitable products like high-tech
- Only few established brands in global markets (e.g. Skoda, Polish / Russian Vodka)
- Consumer prefers branded foreign products thus contributing to a negative trade balance
Advantage - Diplomatic weakness of most EE countries makes them dependant and thus in certain areas
forced to accept less advantageous conditions and disables their individual ambitions
- Most countries have a to small economy to rise funds for leading knowledge (exeption: Russia
and their “Sillicon Valley” Skolkovo)
Next Stepps

5. Situation Competitiveness of Eastern Europe IQ°
The main advantage of companies operating in EE is the cheap but still
highly skilful workforce, In particular craftsmanship, on the advantageous
position between the EU market and the resources in Asia
Summary Low production cost
High potential in the local market
Extremely ambitious workforce
Good strategic location
Situation Skilled craftsmanship of high quality and low price
Lynda Gratton; Management Professor London Business School is underlying the problems of
global competition:
Idea
“the technology replacing a lot of jobs. The jobs that it doesn’t replace is making the more difficult
and more sophisticated technology.”
“So if you have a skill that can be outsources than you are against anybody else in the world. I
Action
think that that´s goanna be particularly difficult for some western economies to cope with.”
“However, if you have a skill that cannot be moved, like if you are a chef or a hairdresser.
Something that is location-based. Then there will always be demand for this skill.”
Advantage This shows that if a company chooses to compete in the IT / Knowledge sector that it will be
forced to compete on a global level, which reduces the possible profits
Tom Malone, professor at the MIT Sloan School of Management underlines the future of work:
Next Stepps
“The key thing that is driving the trend is cheap communication. Instant communication, almost
causelessly”. This trend dominates highly sophisticated, efficiency seeking companies.

6. Idea Competitiveness of Eastern Europe IQ°
As the trend setters in key industries are to far advanced I suggest the
“anti-trend” strategy and focus on local products and services like
healthcare or craftsmanship that can not be outsourced globally
Summary Being realistic – Not innovation but branding is the key
Regardless of the chosen strategy, Germany will still be export leader in engineering, japan and
US will still be leading the market in technology and China / India will still produce more than the
Situation whole EE. Rather than seeking leadership it is more appropriate to develop a strategy that will rise
the general well-being of the country. Making it stable and less dependant.
Example: Slovenia. Thou few resources it has the highest GDP per capita among EE states. The
Idea attractiveness of the country and political stability attracts and retains qualified workforce. The
economy is balanced and thus stable. (e.g. outstanding whine from Slovenia is not about
innovation but about quality and brand).
Action What does it mean for the “future company”?
In general: using the advantages described above and minimalizing the weaknesses
All sectors are important. Finance as well as HR. However it will always be necessary to remain
Advantage flexible but reasonable – not missing opportunities but avoiding too risky investments
Since due to cheap communication and data transfer the competition on the IT / knowledge sector
is global it is better to focus on local products that can not be outsourced, like craftsmanship,
Next Stepps medical services, luxury, branded agricultural products, arts and entertainment etc. The more
aging western population requires caretakers and sanatoriums, health ressorts
The companies in this sector are rather small / mid-sized and entrepreneur lead

7. Action Competitiveness of Eastern Europe IQ°
Subsidies for small and midsized companies who strife who export
products or generate benefits abroad. Companies shall develop and
market local brands and services and sell then on the western market
Summary
Entrepreneurship and Family owned companies. Ex. Leading media company Bertelsmann
consists of several hindered “sub-companies” with an Entrepreneur as CEO each.
Situation EE small companies can close together in cooperation's / alliances / joint ventures to achieve
better trade conditions for example – and still being independent
Idea Future Profession
Like today, and in the past the most desired professions were highly qualified engineers,
researchers, and strategists or people with unique knowledge or skill. In general people who can
bring in a high added value.
Action
-> Best Engineers and scientist will mostly leave for their international peers in Silicon Valley for
example. This trend is very hard to stop (even countries like Germany loose their best scientist)
-> Excellent craftsman can easily move for projects to western Europe while still living in their
Advantage home countries
To support this, the government might share the costs for advisory services that lead small
Next Stepps companies for to local market leadership

8. Advantage Competitiveness of Eastern Europe IQ°
Smaller companies in local craftsmanship and healthcare business tend
to have higher margins, being dynamic, value oriented and thus attractive
for employees. Having a balanced structure makes them also more stable
Summary These industries are less dependant on high productivity than on quality. In the PPP analysis their
strength is place and promotion.
Family owned companies tend to be more efficient, having higher moral values and are less likely
Situation to a hire and fire mentality granting employees a stable workplace.
Smaller companies are easier to manage
Idea They do not obey to shareholders wishes that might have interests that might be contradictory to
the wellbeing of the company, it´s employees or generally to it´s home country
Action
Advantage
Next Stepps

9. Next Stepps Competitiveness of Eastern Europe IQ°
To deepen the analysis and enhance the strategy the creation of a lobby
is paramount
Summary
A lobby for local development of small sized craftsmanship companies is eminent.
It will ensure the scientific underlining of the current thoughts and guarantee the
promotion of the ideas among companies and authorities.
Situation
Idea
Action
Advantage
Next Stepps